tv Closing Bell CNBC August 5, 2013 3:00pm-4:01pm EDT
>> the good news that -- >> anyway, it's good to be back, folks. >> good to have you back. the only upside, the penthouse, it was a little less expensive for you guys. >> he's joking, by the way. >> i'm not joking. >> he is joking. >> thanks for watching "street signs." welcome back, mandy. >> thank you very much. . see you tomorrow. and welcome to the "closing bell," i'm kelly evans down at the new york stock exchange. >> hey there, kelly, scott wapner at cnbc global headquarters. maria and bill will be back tomorrow. and we do have a very busy show ahead. it's, of course, a down monday to start the week. >> -- on friday, but it doesn't look as though we'll be able to do it again today. we'll watch, though, and see what happens over the next hour. some big battles raging among
billionaires this week, and a certain millionaire actor. we'll get to that in a bit. first, bill ackman was leveling a charge at zoros fund. a stock that ackman is shorting. the question is was that illegal or is this just a case of sour grapes? former s.e.c. boss harvey pitt will weigh in. also, much more fallout from george clooney's full-throated assault on dan loeb and his move to try to split up movies. is clooney biting the hand that feeds hollywood? we'll look at that and more. >> look forward to that. also black monday for major league baseball. multiple suspensions for performance-enhancing drugs coming down at any moment. alex rodriguez is expected to get the worst of it. maybe that's why he's the only one fighting the suspensions. we're live in chicago where a. rod is still expected to play his first game of the season this evening.
you can't make this up, folks. we are there for the spectacle. turning our attention to the markets right now. as we mentioned, the dow is down by about 50 points. the nasdaq and s&p are also pointed lower. again, this comes off of friday in which we closed at fresh record highs with the s&p above 1,700 -- 1,709. but not able, at the moment, to hold onto those levels. >> the stocks retreating from record highs. bob, what's the mood down on the floor of the new york stock exchange? >> the mood is cautiously optimistic. the problem is we're going into august, traditionally not a good month for the stock market. volume is now very much on the light side today. take a look at the dow. i would have hoped the ism services number, which was terrific this morning, would have given more energy to the market. that hasn't happened. the dallas fed came out this afternoon, talked about the need for the fed to wind down its bond-purchasing program. that took a little bit of the wind out of the market. looking at the sectors. tech's holding up. apple has a good day. technology's up. consumer staples are up. tyson at a historic high.
consumer discretionary weak. the homebuilders are weak. they haven't done anything big, for days, exxon, shell, all missed. fassenal, a company everybody loves, they make nuts and bolts, came out with sales forecast -- sales commentary for july a bit below expectations. that was one reason the homebuilders were very much on the weak side. as for the numbers here, the economic numbers, i think it's two out of three for july, guys. so the ism services, ism manufacturing both beat. it's the nonfarm payrolls that missed. here's the problem. somebody's got to be wrong here, because the services and the manufacturing numbers both showed that the jobs were expanding, and the nonfarm payrolls said jobs were below expectations. it's not clear who's right. michael roark had an interesting comment. he thinks it's nonfarm payrolls are wrong, they've experienced upward revisions 80% of the time
over many decades. that's an important point to bear in mind. look for some upward revisions in july, nonfarm payrolls. back to you. >> all right, bob, thank you. down on the floor for us. joining us now in our "closing bell exchange" is kyle harrington, anton, josh, and rick santelli. josh, you mentioned how you saw a record amount of money in july flowing into u.s. equity funds. well timed or too late to the party? >> i guess that's a function of the individual person's timeframe. but let's focus on what the big picture here is, scott. why is this happening? we haven't had an economic blowup in quite sometime. and a lot of that money has been hiding out, as though a blowup were imminent. in the meantime, the fed has added about $2 trillion, by my count, of excess liquidity into the system, totally pent up, and at this point, people are starting to envision a future where we actually get some decent growth. it's not here yet.
but some of the signs are starting to point that way. so i'm not surprised at all to see the flows coming in. the most important thing, guys, is that money does not chase value. money chases performance. stock market versus bond market over the last three years flipped positively in favor of risk assets, and that's really why you're seeing the flows change this way. >> all right. and we have some breaking news. much expected news from major league baseball right now. mary thompson has those details. mary? >> hey there, scott, from the press release from major league baseball. commissioner bud selig announcing that a. rod has been suspended without pay for the remainder of the 2013 championship season and the entire 2014 championship season for violations of the joint drug prevention and treatment program. 12 other players have also had also been -- or will have 50-game suspensions. none of those players will
appeal their decision. of course, right now, we're waiting to see whether or not a. rod appeals this. of course, because it will be very costly to him. now, if indeed, he goes through the appeals process, the appeal has to be heard within 20 days and then 25 more days before the decision on arbitration is decided. let me just give you some more from this -- from this press release on alex rodriguez. of course, the yankees star, the highest-paid player in major league baseball. rodriguez disciplined under the joint drug treatment -- excuse me, the joint drug prevention and treatment program is based on his use and possession of numerous forms of prohibited performance-enhancing substances, including testosterone and human growth hormone over a number of years. rodriguez is disciplined under the basic agreement, is for attempting to cover up his violations of the program by engaging in a course of conduct intended to obstruct and frustrate the office of the commissioner's investigation. the you specs, which becomes effective on thursday, august
8th, will cover 211 championship games and even 2014 postseason games as well. rodriguez's suspension will be stayed until the completion of his appeal, if rodriguez files a grievance challenging his discipline, which is likely to happen. so once again, a. rod is suspended starting august 8th for the remainder of the season pending an appeal, as well as all of 2014. back to you. >> all right, mary, thanks so much. mary thompson, again, with the expected news from major league baseball. the suspension of 12 players for 50 games. a. rod for the remainder of this season and all of next season, pending, of course, his appeal. the biggest names on the list of 12, as you call it, jhonny peralta of the detroit tigers, that's big. the starting shortstop for the tigers. and, by the way, they are leading the a.l. central leader. nelson cruz, all-star player for the texas rangers. but everybody trumped by alex
rodriguez, highest paid player in major league baseball, suspended for all of this year and next year. still owed $86 million by the yankees in the remainder of his contract, and what makes this story have a little more sizzle on this day, is the yankees are playing in chicago this evening. a. rod is expected to take the field for the yankees unless we hear otherwise this evening in chicago. we'll have more on this story for the remainder -- throughout the remainder of this program and the "closing bell" at 4:00. but let's get back to our discussion with the market guests, as we focus on this monday in august on wall street. again, josh brown was with us, as is rick santelli, kyle harrington, and anton bear from up capital. anton, to you, what do you make of where we are in the market? where do you think we go from here and between now and the end of the year in the context of the record amount of money coming into u.s. equity funds in the month of july? >> yeah, so i agree with a lot with what josh had to say that
investors are going to chase values. and the challenge is that we're seeing a very technically strong market. the fundamentals are just dragging behind the technicals. we saw the new jobs report, 162,000 jobs last week. but more than 50% of those jobs are wages under $20 a share -- or $20 an hour. and so, what i think we're in -- i think we have a two-stage event between now and the end of the year. between now and september -- i think we're in a flat spot. we don't really have any news that will come out of the federal open market committee. we have some meetings that they're going to do on the 17th and the 18th of september. i think that's going to be a key meeting, where investors will be looking at what the feds are going to do and whether or not tapering will take place. and then we have the second half of after september to december, will be largely predicated on what the feds do and how investors interpret what the feds say. >> well, i'm interested, kyle, is it much about what the fed does, or actually, does it come down to this decision that almost this pivot point as to
whether the economy looks like it's strong enough to justify stocks at record high? you called friday the no-jobs report. >> yeah, exactly. i think this, kelly. i think that the u.s. marketplace is still the marketplace where everybody is still following and going to put money. no return in the fixed-income marketplace. i would agree with anton that the flows are coming into the u.s. markets. however, i would say that going forward here for the next couple of months, i think that the jobs report stays the same. i think gdp growth remains sluggish. so what i would advise is be very proactive. be optimistic but be proactive about finding funds, finding individual stocks, finding etfs that match your individual risk tolerance, because i think it's going to be choppy and volatile from here -- >> to some extent, that's what we've seen. we've seen correlation drop. we've seen people be rewarded for picking the right names in this market. i guess, do you have any recommendations that are specific, then, for people sort of looking at the set of circumstances and say, okay, well, i'm happy to pick, but tell me what to pick.
>> here's what i think. i think growth. i think alpha is going to come from the technology sector, the biotechnology sector, going forward in the united states. so identify tech funds or individual stocks that have, i think, large cash positions, are buying back their own individual stock -- a company like intel, which everybody knows -- but i think a reasonably valued, and put those in your portfolio and watch them very cautiously. >> rick santelli, you know, as we watch rates here and we talk about this record amount of cash coming into u.s. equity funds, are you prepared to think that a great rotation, or any kind of rotation really, is upon us? is this money coming out of bonds and into stocks? is this mom-and-pop money from the sidelines that finally believes in the rally? what is it? >> no. as a matter of fact, i urge all viewers and listeners to go to cnbc.com and look at my santelli exchange extra with the chairman of trim tabs that we're quoting. he talks about the disproportionate amount of that $40 billion that's etfs, and
historically that's a contrarian indicator. as far as the great rotation, i would say consider it this way. interest rates have been very sticky. it's an asymmetrical relationship. there's more good upside on down numbers, just look at the last two employment reports. with the stickiness, there's a lot that has to do with the a. rod story. i think there's a lot of asterisks in the investment community right now, and 2.6 trillion in money funds, that's the source of your great rotation, and i think it's going to hunker down there for a while longer. >> so, josh brown, you know, in the context of what may or may not happen with the taper, when it may come down the pike, what do you think the market is prepared to do once we get into september? >> well, i think the taper probably at first generates some tremors in the market. i think the narrative shifts and ultimately people look at it as a positive sign, if and when they do taper, that the fed even can, and that the market doesn't fall to shambles.
i just want to disagree with rick santelli on the concept of etfs historically being a contrarian indicator. i actually think that's wrong. i think that they used to represent much more aggressive money than they currently represent. people didn't use to substitute etfs for mutual funds back in the day. but now they do. so i think the holder is not the same. so i don't want to look at that as all aggressive trading money. a lot of etfs now are long-term positions. they're not what they used to be. >> all right. it's a great point, josh. we want to thank you and tom kyle and rick for joining us in the "closing bell" to kick things off at the top of the hour. now breaking news on detroit's bankruptcy and the value of the city's art. robert frank joins us now with the details. hey, robert. >> reporter: kelly, big news, or possibly, for the detroit bankruptcy. the emergency manager kevyn orr has hired christie's to assess the collection of the art. the art is valued by many as well over $1 billion. orr says that while, quote, there is no specific plan to sell the assets, the move is
taken at the request of creditors. he said, quote, the city must know the current value of all of its assets, including the city-owned collection at the dia, and orr's statement goes on to say there's never been, nor is there now any plan to sell the art, this valuation as well as the valuation of other city assets is an integral part of the restructuring process. it is a step the city must take to reach resolutions with its creditors. it goes on to say that this is needed for the strong future of detroit and its residents. he said the auction house will also advise the city on, quote, nonsale alternatives. unclear what that means. christie's will be valuing works like van gogh's self-portrait, and the collection includes working by picasso and others. christie's is confirming the hiring, saying it will, quote, continue to focus the efforts on being a positive force in both the interest of the city and the arts community, including working with our fellow arts professionals at the dia. this is important, because while
there was speculation they could sell this work, there had never been the official hiring for an assessment or christie's involvement. guys, back to you. >> do we even know, robert, a value -- is there any estimate of the value? >> the initial expert estimates were over $1 billion. i mean, just my back of the envelope, looking at some of their collection and others looking at it, it is well over $2 billion. and given where the art market is right now, it is so hot, these prices are so high, it could be well over that. so i think this number, when it comes out, is going to be huge. you look at what these pension funds are saying, the police pension funds are saying, you know what, we'd rather the money than the art. you'll have a battle between the pensioners and the cultural groups. this will be a hot-button issue in detroit. >> yeah. >> $2 billion. wow. robert frank, thank you very much. >> okay, guys, thanks. >> robert with the latest on detroit's art collection. now, about 45 minutes to go before the closing bell and dow is sitting down about 45 points. >> big news out of china. the government there reportedly
considering its one-child-only policy -- or reconsidering, which could have a huge global economic impact. that story is next. then, the street battle that seems to be targeting hedge fund bill ackman is heating up again. now, george's fund is involved and now ackman is throwing out accusations like insider trading. we'll get you the details on that. and another hedge fund battle, the fallout after george clooney's harsh words for dan loeb saying wall street guys know nothing about the movie business, but who funds much of the movie business? we'll talk to a hollywood movie producer about where the movie money comes from and how much of it is from wall street. you may be surprised by those facts. [ male announcer ] come to the lexus golden opportunity sales event and choose from one of five lexus hybrids that's right for you,
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welcome back. an interesting report out of china today that could have global economic implications. after more than three decades, china may be reconsidering its one-child policy, even as soon as the end of this year. why now, and what would it mean to the global economy? with us now is the author of the
coming collapse of china, gordon chang along -- lee "what the u.s. can learn from china." great to have you both with us. ann, why do you think china is reconsidering this now? >> they have a number of challenges going on. they are in the midst of a transition from an industrial-oriented economy to a more service-oriented economy. and they haven't generated enough service jobs to absorb all of the young college graduates coming out of school. and so, there's elevated unemployment amongst this segment of the population. and so, if they basically say to the women graduates, here, you can have babies in the meantime, then that basically reduces the pressure of competition amongst these folks. and at the same time, it makes gdp growth less important for a lot of the government officials, as they try to make this transition.
and so, i think that it helps them from that standpoint. >> sure. >> and it also helps the one-time consumption levels, because if people are having larger families, then, yes, this will help rebalance their economy. >> you know, gordon, a lot of people have pointed to china's demographics as, first of all, being on par, if not worse, than the west, but being bearish on china. if they make these changes, does that story have to change because they get a tailwind from demographics? >> if they make these changes, we're talking about changes 16 years from now. so going into the fourth decade of this century, and we're not talking, you know, a great number of people. for china, maybe 9 million, 10 million people, more people -- >> these will be people who are single children -- >> in the workforce, yeah. so essentially, we have a problem here. this shows the paralysis of the political system, because they've been talking about making the changes for more than a decade, and you have the workforce shrinking.
that started in 2010. >> why do you think they are opening -- why do you think they're not moving more aggressively, i guess is the question, if this has been in the works -- if the demographic headwind is acknowledged here? >> there are a couple of reasons. first of all, the family planning bureaucracy has fought this claim, and the communism party maintains party in rural areas where the apparatus has been eaten away. the party also does not want this change. that's why this should have occurred a dozen years ago, 20 years ago when it was evident that this was going to happen. the fact that they've waited so long shows the problem in the political system. >> right. so, ann, essentially, gordon saying too little, too late. you think he's wrong? >> well, i absolutely don't think that this policy's going to have a major impact, because china, like many other developed countries, are facing falling fertility rates, mostly because women are getting more education. and since the one-child policy is directed mostly at young
urban women, given all the exceptions to the rule they've made for rural workers, for ethnic minorities and so forth, that even if they lift this and reverse this policy, i'm not so sure it's going to actually change the longer-term trend of an aging population. >> gordon, it's a great point. >> yeah. of course. but there are a lot of people in china who want to have more than one child. you know, we saw that in a survey released this week, that 56% of the chinese people would have two children if they were permitted to do so. we know that this is an extremely coercive policy, that many people don't have more children because of it. and, yeah, everything she said is right, but nevertheless, china would be biller today but for this policy. >> is there a sense people have been going around the rules anyways, because there's often high-profile media examples where someone -- a chinese official will be photographed with six or seven kids or something like that. is the issue as bad as we really think? >> well, yeah, there are children who are hidden. you know, when i was living in shanghai, there was one client i
had. he was willing to say, you know, down with the communist party, in public, in print. the only thing he wouldn't let me say was that he had two children. he had two boys. >> it does tell you something. this one, it sounds like not quite a game changer, the communist party may have to do more on that front. >> definitely. >> gordon and ann, thank you for your thoughts on that, an important change potentially coming out of china. >> all right, kelly, 35 minutes to go before we close up the markets this monday. looking at the dow. holding a loss of 45 points, an overall down start to the week on the street. >> that's right. first, it was ackman versus icahn, and now ackman versus soros, accusing soros' firm of breaking insider trading rules by telling hedge fund shares of herbalife. that's next. and semiconductor sales surging 6% last quarter. coming up, the ceo of the semiconductor industry association tells us how chipmakers are dealing with falling demand for high-end smartphones.
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it looks like a down day for stocks after friday's close at fresh all-time highs. josh lipton looks at today's big movers. hi, josh. >> reporter: hi, kelly. a few movers on the radar. first up, tyson foods hits a new all-time high, reports and beats expectations. demand for chicken and beef. revenue jumps to $8.7 billion. that also besting estimates. that stock up some 50% so far this year. and another one in the green,
revlon. agreeing to buy a beauty care company from cvc capital partners for $660 million. revlon has absolutely soared higher this year. up now nearly 80%. not working today, that would be fossil, by barclays downgraded to underweight. its checks indicate sales trends have slowed, especially following the end of the second quarter, and also cut the price target to 100 bucks. hsbc also losing ground. analysts reporting that the bank's revenues slowed faster than forecasts, concerns here about the impact of slower emerging markets. and finally, ending on herbalife, rising today. cnbc reporting that bill ackman's pershing square lost 2.2% in july. ackman, of course, has a short position on herbalife, now up some 100% this year. kelly, back to you. >> all right, josh. and on that note, the herbalife saga continues. now pershing square's ackman is getting the s.e.c. involved. he has filed a complaint with regulators after george soros
made a big investment in herbalife, news that scott first reported here on cnbc. >> kelly, the petition addresses concerns that soros is in violation of some insider trading rules by alerting other hedge funds at an ideas meeting about his big bet on the nutritional supplement maker. joining us now is former s.e.c. chairman harvey pitt. mr. pitt, welcome. >> good to be with you. >> what do you think about mr. ackman's claim here? >> well, i think this is -- seems to be like a desperation move and the kettle calling the pot black. when mr. ackman went short, he had a huge public announcement and urged people that the stock was way overvalued. now, there are people buying the stock, and it's cutting into his profits, so he's trying to retaliate. >> right. but, i mean, he did what he did in a public forum, in a room of several hundred people, covered
by various business journalists, cnbc, and others. if what mr. ackman is alleging is true, what was done there was in a private forum, among other hedge fund people, not open to the public. isn't there a tremendous difference between the two? >> there is a difference, and it's a fair point. but it's a far cry from necessarily establishing insider trading. in order for there to be insider trading, there has to be a misappropriation of information. and here, soros is the owner of the information. it's proprietary to soros. so even if there was a disclosure of an interest in the stock, that by itself wouldn't be a leak of material, nonpublic market information. >> right. harvey, do you have any concerns with the concept of ideas dinners themselves, or is it
just an issue when the idea -- ideas being shared, you know, when those ideas came from nonpublic information basically? >> i think the s.e.c. has a lot of concern about these ideas dinners. they worry that it's a surreptitious form of people starting to act in concert. but it is very common. and if it is done in an appropriate manner, it won't by itself raise insider trading or beneficial ownership problems. >> but what happens, harvey -- let's just -- let's just assume, okay, you're at an ideas dinner, you're around the table, somebody with the cache of a representative from a george soros-named firm, so you have the cache of soros, stands up and says, "we are long herbalife, and here's why," essentially saying we're long herbalife, you guys should take a look at going long herbalife,
and oh, by the way, it comes days or weeks before the earnings report, so you have the cache of soros getting in, when that becomes public, you know the stock's going to pop, and the timing as well. doesn't that all factor into the situation? >> it does factor into the situation. but again, it depends on what the discussions are and whether there's any effort to try and persuade people to take the same kinds of positions. merely talking about stocks that look good to people is something that goes on commonly all over wall street, and by itself will not create a legal issue. >> yeah, but what if they -- what if in the context of the conversation, mr. pitt, it became explicit at some point? who knows if it was. i'm throwing it out there. it became explicit, you know what, we're long herbalife, and you know damn well the stock will pop when the market finds
out soros is long herbalife, so hint, hint, maybe you guys should get long, too. >> yeah, i think you're in a position where that could cross the line, and that's obviously why i think the s.e.c. will want to take a look at these allegations, even though they emanate from somebody who's got a pecuniary interest of his own. >> wow. huge issue, harvey, because we know the dinners happen all the time. a lot of questions being raised, as scott indicated, telling someone about what you're going to do amounts to insider trading. thank you very much. the dow here sitting down about -- about 36 points, coming off the lows of the session, scott, which, of course, about double the levels. we have about 30 minutes left in the session. >> yeah, the white house is overturning a ban on some older iphone and ipad models. find out if that could help turn around the stock, which is down 12% this year, although it has been on a pretty good run of late. kelly? well, speaking of runs or lack thereof, talking about
weird timing. news breaking this hour, major league baseball is suspending alex rodriguez over performance-enhancing drugs, but he is expected to appeal that ban and make his season debut tonight. we'll look at how long the circus may drag on later on the "closing bell." clients are always learning more to make their money do more. (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning every step of the way. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade... ranked "highest in customer loyalty for brokerage and investment companies." otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business.
well, if you've been paying close attention, you know the nasdaq is down less than the s&p and dow today. a big reason for that is apple. seema is at the nasdaq keeping an eye on this one. >> reporter: hi there, kelly. this took the street by surprise. the white house reversing the decision that had banned the sell of certain older apple iphones and ipads. the original ruling had said the products violated samsung patents. as a result of this decision, samsung lost about $1 billion in market cap overnight in korea. on the other hand, shares of apple hitting a four-month high. analysts at morningstar say only a small minority of product was threatened by this ban, at most maybe 2 million iphone 4s, or approximately $900 million in quarterly revenue. you can see shares of apple trying to breach that $470 level. kelly, back to you. >> all right, seema, thanks.
so with apple shares touching a four-month high, we asked, should you add it to your portfolio now? let's start talking numbers. on the technical side, carter joins us, from oppenheimer, and for the fundamentals, mark is an association investment director at the oxford club. guys, good afternoon. thanks for joining us. carter, let's start with you. >> sure. we like it. simple as that. and it has all of the hallmarks of we characterize a bearish too bullish reversal. the precondition is bearishness. and this is a stock having been quite bearish, 705 to 385, starting to bottom. when it made the plunging low in april of this past few months and then it ricochetted hard, when it came to approach the low again, it didn't make the new low. and now, again, well-defined series of higher lows outperforming the market, and people, we would argue, are trapped out, just as they were trapped in up at the highs. >> okay. mark, what's your take? >> yeah, normally, carter and i
disagree, but this time he is right. i do like apple here. the company generates $43 billion a year in free cash flow. it has $154 a share in cash. they're in the middle of a huge $45 billion stock buyback. earnings growth is expected to be double digits. they raised the dividend by 15% in may. it could easily do so again. so i think there's a lot to like here. you know, apple is not the same apple it was in 2000 or 2003 or 2007. a little bit more of a mature company, but generating tons of free cash flow, and i think the stock gets north of $500 sometime this year. >> 500. carter, can you tell from the charts where we might be headed? >> i think that and a little more. but 100% with that judgment. and importantly, the stock now has more sales and holds than it's had at any time in the last five years, so people have sort of given up on it. >> and talk about the cash levels, marc, for a second. what does that tell you in terms of the valuation here? what can we support? how high can prices get?
>> i can see about $530 to be in line with its peer group. you know, one thing that carter mentioned, about sentiment, i wanted to touch on, too, because people have not come around to the apple story. everybody is waiting for the great next device. and i think we're a little bit past that. like i said, it's more of a mature company. and i think apple can easily just kind of run its business, still obviously needs to feed the beast and come up with products that people want. it doesn't have to rely on that one, you know, next great big thing in order to sustain its valuation and go higher. >> well, now i'm worried, if you both agree, that there is some contrarian science. we'll leave it there. thank you very much for your thoughts. >> thank you. there are just about 20 minutes left to go before the closing bell. the dow is down about 37 points. the s&p 500 is pointed down by about two. so it doesn't look, unless we get a late-day turnaround, i should say, we'll be able to reclaim the closing highs on friday. we'll keep an eye on it and see what happens. usually, an anniversary is worth celebrating, by the way.
how should we approach today's second anniversary of the s&p downgrade of the u.s. credit rating? eamon has that story next. will anyone be celebrating in chicago tonight? a. rod maybe. after the bell, baseball's $275 million man was planning a return to the diamond for the first time this season. on the same day he is suspended for performance enhancing drugs. a live report in just a bit. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550 then schwab is the place to trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550 learn how you can earn up to 300 commission-free online trades tdd#: 1-800-345-2550 for six months with qualifying net deposits. tdd#: 1-800-345-2550 see how easy and intuitive it is to use tdd#: 1-800-345-2550 our most powerful platform, streetsmart edge. tdd#: 1-800-345-2550 we put it in the cloud so you can use it on the web. tdd#: 1-800-345-2550
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two years ago today, august 5th, 2011, stand & poors downgraded the credit rating. more from eamon in washington. eamon? >> reporter: hi, kelly. the markets are up a ton since then. but congress this week anyway is out on vacation. it's august here in washington, and that means the members of congress ski dadled at the end of the session last week. they're going home to their districts. they're going out to campaign. they're going out to raise money, on vacation. what they're not doing in washington is dealing with the next fiscal crisis that could be
looming right around the corner. remember, at the end of the fiscal year comes in september, they're coming back in session september 9th. but at the end of the month, they're going to have to come up with something to do with the federal budget, possibly a continuing resolution that could be contentious. and after that, later in the fall, the debt ceiling fight. we'll have that all over again. even though the deficit itself has been going down, because remember, earlier this year, we did raise taxes and lower spending through sequester. it was -- they sort of backed into that deal, but they did do it. and now the deficit is down about $124 billion just since the projections back in march. so that is some good economic news. but there are these two sort of decision points that are looming and congress is doing almost nothing about it right now. of course, you remember that whole downgrade back in 2011 was because of political gridlock here in washington, kelly. >> that's right. eamon, what's interesting as well, if you read between the lines as to what you're hearing -- or what i'm hearing out of washington, anyway, it sounds like what's happening is the last couple of times around,
there was a real concern by the gop to make sure that we didn't increase spending. in other words, it was a very sort of fiscally conservative argument. and now, it seems to be more about using the debt ceiling to keep obamacare from being implemented. does that sound about right? >> yeah, that's interesting. thes fascinating piece in "the new york times" weighing in on the difference between the republican governors across the country who say keep the government open, don't have a government shutdown, include the funding for obamacare if you have to. but let's not have brinksmanship and some of the republicans here in washington who say, look, our base wants us to defund obamacare. we have to use every tool in our arsenal to do it. and one of those is to have an obamacare fight right in the middle of this continuing resolution, the government shutdown fight. that's something that the republican party seems very split on right now. >> right. to make that about obamacare ultimately instead of obamacare being part of the issue around the debt ceiling. anyway, topsy-turvy times and markets are shrugging it off. >> congress is shrugging it off,
too. they're out of town. >> good point. >> yeah. they're not stressed about this. they have some secret plan to deal with these problems, i don't know about it. >> maybe we can fix this one in the 10th hour? >> yeah. >> maybe some progress? >> yeah. >> eamon, thank you, sir. >> you bet. about 15 minutes left to go before the closing bell. we've been keeping an eye on the dow, down about 38 points, and the s&p lagging. the nasdaq helped out a little bit by apple as we were discussing earlier. buying on the dips, though. that's what merrill lynch is telling clients. find out why their analyst is bullish on the market. a record $43 billion poured into equity funds last month. just $21 billion was pulled out of bond funds. is it proof retail investors are finally getting off the sidelines, rotating into this market? we'll debate later on the "closing bell."
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welcome back to the "closing bell." we've got just about 10 minutes to go here. we're trying to see if markets can turn back into positive territory. it doesn't look like it for the time being with the exception of the nasdaq. joining us now to help break it all down is mary ann bartell. welcome. >> thank you. good to see you, kelly. >> you, too. you've been traveling, talking with a lot of clients at
merrill, and i'm sure hearing interesting points of view when it comes to the retail investor and how they perceive the market as opposed to what we hear on the street. >> that's correct. we're hearing two different things. if you look at our data flow, it is suggesting that private client is buying. but when i'm actually out marketing, i'm not hearing that as much. really what we're seeing is the ultra high net worth clients are in the equity market, but if you're not high net worth, you're not. >> what's the cutoff? >> 30 million or higher. >> 30 million or higher. so what's happening is we're maybe seeing if you look at the volume of flows, actually an overrepresentation of a few people at the top end, and a lot of the people just saying, forget about it. >> yeah, what i'm really surprised is the institutions and pension funds have not been buying the market. they've really been net sellers. even hedge funds haven't been buyers. it has been the private client that's been buying. a lot of people would say, well, that's got to be a contrarian side, private client coming in. they've been out of the market for so long.
>> right. >> it's only the first few -- you know, four months or so we've actually started to see them actually put their toes back in the market. and if they continue to buy, this might allow the markets to go up a little bit higher. >> well, that's certainly what we've seen so far. it was interesting to look at berkshire's results and be reminded again that even as the market was hitting new highs in the second quarter that warren kept buying. what do you think it is that the ultra high net worth investor is willing to do or seize or stomach in order to keep buying into a market that's rallying, whenever everyone else is going, we're not so sure? >> they have more of assets, right? they have a little more flexibility. when you enter a new secular bull market, which we believe we're in a new secular bull market, out of that trading range, normally takes investors five years to realize that something's changed. it takes the market a really long time to know that there's something different. they're always looking over their shoulder. and right now we're worried about tapering, worried about interest rates going higher. there's always something next they worry about. we've even seen strategists on the street not have a lot of
exposure to the market. we're starting to see them raise their allocation to the equity market. but they're not ultrabullish. >> at the same time, we're sitting here at 1,700. thursday and friday were the first times we closed above there for the s&p 500. there are a lot of people who say, is it smart for me to get exposure to stocks at all-time highs? what do you say to that? >> we were in a trading range for 13 years. we're coming out of that range. if you believe we're going into a new secular bull market, it's still very early in the game. now, we're looking at a three to five-year timeframe. we still see corrections happening, but if you can take that longer-term view, we think there's a lot of good valuation in the market. >> what 13 years are you referencing there? >> going back to '99, 2000, up until this year, the markets, the dow, the s&p, were in a trading range. now we've broken out all-time highs out of that range. >> it feels a little more volatile than a range -- usually when i think of range, i think, we're not going anywhere. i mean, my god, those 13 years were dramatic. >> very dramatic. similar to 1968 to -- going into
'82. markets went down 50% in '68, '73, '74, the market down 50%. we did the same thing in this trading range, 2000, down 50%. '08, '09 down 50%. so the yield, you know, the behavior is when things go wrong, consecutively, it can take us years to rebuild confidence to invest again. >> so if you guys are right and we're at, say, what that five-year mark from the last, you know, aggressive -- from the lows, basically -- what happens now? how much further does this play out? and what is it that ultimately derails it? what are sort of the risks out there right now that you're most focused on? >> we have a year-end target of 1,750. the technician disget it higher around 1,775. seasonally, the markets get weak around september into october. we're talking about the fed potentially tapering in september. you know, if rates get above 10-year treasury yields, above 3%, that may make the markets nervous. certainly if they get to 3 1/2, we don't think that would bode
well for the equity market. you might see a little bit of turmoil. the issue for our clients, from an asset allocation standpoint, is fixed income is now a volatile asset. they're not used to having fixed income having volatility. and we're now expressing there is volatility in that fixed income portfolio. >> it's a great point. and as this -- this is as we watch the vix for stocks, back under 12. so it's in flip-flop this year, mary ann, thank you very much for your views. >> thanks, kelly. up next, we're back with the "closing countdown," and it's a battle worthy of a hollywood film. clooney is blasting dan loeb. you're watching cnbc first in business, worldwide. [ male announcer ] come to the golden opportunity sales event
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with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. it's the "closing countdown," the homestretch. we have about a minute and a half to go before the closing bell rings at the new york stock exchange. the dow jones industrials average down by about 50 points. it looks roughly where we're going to close today. not able to hang onto the friday closing highs. the nasdaq, though, bucking the trend, we're seeing in the dow and the s&p, by moving a little bit to the upside, at least as things stand now. helped, of course, by apple. so time for the "closing countdown" now. and we can take a look at some of the sectors in particular that we're watching. leaders and laggards when it comes down to this market. look at, for example, what's
happening in the dow. we have the likes of travelers, utx, j&j leading things to the upside, disney and exxon, as well. some things, coca-cola, american express. i mean, this looks like a lot of the industrials and united health leading the way to the upside, as well. in terms of some of the most active stocks, we can turn our attention to the likes of ford, bank of america, and also pfizer, sprint, nokia, movement in the telecom names. all-time highs today despite the lower market hit for names like costco, 20th century fox, dow chemical, jm smucker's, tyson foods, also talking about patterns it's seeing across the emerging market space. but a lot of talk about demand for beef and chicken and what that means for consumers. 20th century fox down by .5%, and tons of talk today about what's happening in the cable space. comments in the "wall street journal" from cablevision ceo talking about the trend that he's seeing with that company and whether they're even going to offer cable or simply have broadband in the future. in the meantime, of course, the spat continues between time
warner and cbs as people wait to see how that one will be resolved. looking forward to the sports. of course, showtime. that's the closing bell down here at the new york stock exchange. [ closing bell sounding ] being rung. that's the nasdaq, as well, where we're looking potentially for a positive close despite the other two indexes starting off the week to the downside. and it's 4:00 p.m. on wall street. welcome to the "closing bell." i'm kelly evans along with scott wapner. maria bartiromo will be back tomorrow. here's how we're finishing the day on wall street. the dow jones industrials average losing ground by about 46 points. the s&p 500 closing down 2 1/2, although it's managed to stay above the 1,700 level for the third day in a row and nasdaq helped by apple. starting the week in the red. joining us for more, we begin with the market panel, paul from heritage capital, doug from riverfront investment group, kenny from o'neil